It was a little before 6pm on 19 January 2004 in Baghdad and the early evening air outside Saddam Hussein's former Perfume Palace was turning cold. Inside this most ornate of Saddam's former homes replete with crystal chandeliers and indoor swimming pool, Dr Rod Barton was sitting behind his desk waiting for his visitor from London to arrive.

As one of the world's leading experts in biological and chemical warfare, Barton had been hand-picked by the CIA to be the special adviser to the Iraq Survey Group (ISG), the body to which George Bush and Tony Blair had given the task of finding Iraq's weapons of mass destruction. Barton, who worked for the Australian secret intelligence services for more than 20 years, was working on what was shaping up to be a highly controversial 200-page report.

Despite all the publicly stated optimism of the British and US governments that the survey group would find Saddam's WMDs and help justify their decision to invade, the group was preparing to reach quite different and damning conclusions. Not only did Saddam not have any WMDs at the time of the US-led invasion, the report would boldly state, he had not had any programmes to manufacture such weapons after 1991.

For the critics of the war, it would be used as evidence that Britain's 2002 WMD dossier was wrong. 'I had come to that conclusion within one week of arriving,' said Barton. But it seems on that cool January evening, his visitor from the UK had different ideas.

Members of the intelligence services rarely speak about the secret world they inhabit. But for the first time in the British media, Barton has decided to talk about the extraordinary events he witnessed last year. His account gives a fascinating insight into the operation of the intelligence services and throws a light on a shadowy world.

Almost a year ago, Barton was one of three senior weapons inspectors of the Iraq Survey Group, including one unnamed Briton, who resigned in protest at the 'dishonest' censorship and political pressure they say they came under.

In an exclusive interview with The Observer Barton details how senior figures in British intelligence tried to stop the ISG publishing its interim report when they realised what it would say. He also reveals how when this failed, John Scarlett, who was then head of the powerful Joint Intelligence Committee and was subsequently appointed by Blair as the head of MI6, tried to strengthen the ISG report by inserting nine 'nuggets' of information to imply Saddam's WMD programmes were active, despite evidence to the contrary.

Barton's disclosures echo some of the claims made a year earlier by Dr David Kelly, the weapons scientist who committed suicide after being outed as the source of the BBC story that the government's dossier on Iraq's WMDs had been 'sexed-up'. Scarlett was the chief architect of that dossier.

The bespectacled man who entered Barton's office on that January evening in Baghdad was Martin Howard, deputy chief of defence intelligence at the Ministry of Defence. Four months earlier, Howard had been cross-examined during the Hutton inquiry and accused of taking part in the 'parlour game' that led to Kelly's name being leaked to journalists as the source of Andrew Gilligan's BBC story. Howard rejected the allegations but was nevertheless a central figure in the MoD's handling of the Kelly affair.

During his time in Baghdad, Barton kept notes in a personal diary. According to his entry for 19 January, Howard arrived at '1800 hours' and had a different perspective: he didn't want the ISG to publish a report - at least not then. Barton's diary records that Howard wanted to wait until the ISG found something 'substantive'. Barton assumed this meant a weapon.

'He came into my office,' said Barton. 'And he was not very keen on having this report.' Howard told Barton that if a report had to be produced it should, at this stage, avoid any firm conclusions.

Howard flew back to London the next day and then took part in a three-way video conference with the CIA and Barton's team in Baghdad. Howard made it clear that he had discussed the situation with Scarlett and the UK would prefer if the report were not published.

Barton said: 'He spelled it out. We had a video conference and he said our preference is not to have any report.'

Barton argued that this was not an option. Not only had the report been promised to Congress but the British, US and Australian governments had 'spent a heck of a lot of money' on it. To Barton's relief John McLaughlin, deputy director of the CIA, over-ruled Britain's position, saying a report must be published by late March.

The battle was now on as to what the report would say.

At around this time a crisis was brewing in London and Washington. David Kay, the former United Nations chief weapons inspector who was put in charge of the ISG after Saddam was toppled, was about to go public with his views after resigning from the group earlier in the year. Despite being among the most hawkish inspectors who was once certain Saddam had stockpiles of WMD, he had changed his mind. On 28 January, Kay told the US Congress that he and many others had been wrong: Saddam had not had any WMDs. It was a bitter blow to both Bush and Blair.

In a December 2003 broadcast for British Armed Forces Broadcasting, Blair claimed the ISG had made a breakthrough. 'The Iraq Survey Group has already found massive evidence of a huge system of clandestine laboratories, workings by scientists, plans to develop long-range ballistic missiles,' he said. British ministers were still using the fact the ISG had not finished its work to rebuff attacks on their position.

But in Baghdad's Perfume Palace the situation was looking very different.

In February, the CIA appointed Charles Duelfer as head of the ISG and he flew out to Baghdad to take control. Barton was kept on as his special adviser. Barton's diary entry for 15 February said: 'We have done a lot of investigations. We have found no evidence. I believe we have a duty to report that. Anything less is dishonest. After all, if we had positive results we would report that.'

But, according to Barton, Duelfer initially took a different view. Shortly after his arrival he arranged a meeting with the ISG team leaders in a room renamed the Winston Churchill. He announced that there would be a short 20-page document without conclusions.

'It became clear to me in discussions [with Charles] the following day that he meant no assessments either,' said Barton, who feared this would lead to the inclusion of only partial information. For example, it would be wrong to cite the discovery of aluminium tubes which the British dossier once claimed were for nuclear centrifuges, without stating that evidence had been found that these were in fact for conventional rockets.

Barton saw this as being economical with the truth. 'To use an analogy, it was like being at a dinner party the night before and somebody asks me what I had and I say "coffee". If I say nothing else that implies that's all I had.

'It would be dishonest. If we know things and we don't say it, that is being dishonest and I didn't want to be party to it.' A few months later Duelfer would come to agree.

Yet at the time, one thorny issue confronting Duelfer was how to deal with the two mobile trailers that had been found and brought back to ISG headquarters for inspection. The US Secretary of State, Colin Powell, famously used photos of these as proof of Saddam's elusive biological warfare programme when he spoke to the UN Security Council to garner support before the invasion.

Barton's diary entry suggests that he believed Duelfer would have preferred not to inspect them or know, so he could genuinely say in Washington that he doesn't know what they are for.

Barton told Duelfer: 'You can't say we found a trailer but don't say we know that they are not for WMD but to generate hydrogen [for artillery balloons]".'

The decision was made simply not to refer to the trailers at all in the report.

A few days later, Barton circulated a draft of the 20-page report to the intelligence agencies in London, Washington and Canberra, to see if they supported the approach. He received a shock reply. On 8 March, Duelfer called Barton into his office and showed him an email he had just received from Scarlett. The Joint Intelligence Committee, of which Scarlett was head, is a hugely influential body, assessing intelligence and liaising with the Prime Minister and ministers.

The email suggested inserting nine 'nuggets' into the interim report. Barton has refused to reveal what these nuggets were because the contents of the email remain classified. But it is understood from other sources that these included suggestions that Saddam was working on a smallpox weapon, did have mobile biological laboratories and was developing research equipment for use in nuclear weapons.

When Barton saw Scarlett's email he was shocked. He had worked with previous heads of the JIC and believed such behaviour was unacceptable.

'I couldn't believe it,' he said. 'He was suggesting dragging things from a previous report [that the ISG had been found to be false] to use them to, well, "sex it up". It was an attempt to make our report appear to imply that maybe there were still WMD out there. I knew he had been responsible for your [government's] dossier and then I realised he was trying to do the same thing.'

A note Barton made at the time suggests that he believes one possible reason for Scarlett's attitude may have been to 'establish breaches of UN Security Council resolutions'. This was, of course, a vital plank in the government's legal and political justification for invasion. Barton told Duelfer that they could not include these so-called 'nuggets'.

Yet more was to follow. Ten days after Scarlett sent his email, another video conference was arranged between Washington, London and Baghdad. This time Scarlett appeared personally. He asked whether his 'nuggets' were going to be included. Duelfer stood up to Scarlett and told him that they were not.

Although Barton had considered resigning earlier, he was pleased he stayed: 'If I resigned those nuggets might have been put in. I stayed and gave Charles a backbone.'

Barton firmly believes Scarlett was trying to 'sex up' the report and that his email to the ISG should be declassified and made public. While the published report did not include Scarlett's nuggets, Barton believed it was still a dishonest document and resigned along with two other inspectors. The short report, which lacked any firm conclusions, received little media attention - a successful outcome for the intelligence agencies in London and Washington.

Speaking from his home in Canberra, Barton questioned Blair's decision to make Scarlett the director of MI6. He said: 'As chairman of JIC he [Scarlett] was in a very influential position. He can influence major assessments of a whole range of things. Now that he has moved to head of MI6 he has a more narrow field, but it is his objectivity that must be questioned and whether he is a suitable person for that position.'

Barton also believes that elements remain in British intelligence who simply cannot accept they were wrong about Saddam's WMDs. All Barton's allegations have been put to the Foreign Office, but it declines to comment on intelligence matters.

Last August, Barton was invited to a top-secret meeting in London. Although he had resigned from the ISG he was still working for Australian intelligence. By now, Duelfer was determined to publish a comprehensive report in October 2004 spelling out the conclusions Barton and Kay had come to: there had never been any WMDs in Iraq after 1991.

Barton received an assurance that this was Duelfer's position and agreed to help him put the final report together. Barton attended two meetings in London with representatives of the CIA and MI6. The first was at the US Embassy and the second in the Old War Office in Whitehall.

To Barton's astonishment there were still some members of the British team who 'did not accept the ISG conclusions'.

To prove his point he refers to the annual report published last month by the House of Commons Intelligence and Security Committee. In it, the JIC reviews its performance in relation to Iraq and its role in producing the 2002 dossier. Barton accuses the JIC of using 'weasel-words' to deflect criticisms. The JIC said that programmes to produce chemical weapons and retain 20 long-range al-Hussein ballistic missiles had 'not been substantiated'. Barton said that both these claims had been found to be incorrect by the ISG and to say they had 'not been substantiated' was like saying 'a Scud missile programme on the Isle of Man had not been substantiated'.

Barton said: 'Intelligence agencies have access to information that nobody else can see. They have a duty to use words responsibly. The US have finally come to terms with the fact they got it dead wrong. The UK is lagging far behind. They still haven't come to terms with it. Some analysts [are] still thinking this stuff is going to turn up. Unless they accept they did go badly wrong, how can they ever improve?'